Statutory powers of maintenance Flashcards
Who can receive trust income as it arises?
Adult beneficiaries with vested interest
unless someone has a prior interest or the trust instrument contains a duty to accumulate the income
What happens if the beneficiary is a minor?
They do not have the same entitlement to trust income
trustees must accumulate the income until B reaches 18
Accumulated income is added to the capital and distributed at the same time as capital
What if minor Bs want to access income before 18?
They have a statutory power of maintenance.
This allows them to pay trust income including any accumulated income for the maintenance, education, benefit of minor Bs.
When is this statutory power of maintenance available?
For minor Bs with a vested or contingent interest in the capital as long as no other b has a prior interest in the income
When the TI has not ammended the statutory power or excluded it completely
If TI is silent on powers of maintenance then the power will apply.
What are the key points in relation to maintenance, education and benefit of a minor beneficiary?
Ts have broad discretion and a non exhaustive list of uses can include:
1. school fees
2. medical bills
3. food, clothing and rent
4. leisure and holidays.
What happens if the trust was created before 1 October 2014?
Statutory power is more limited
trustees can only apply such income as is reasonable in the circumstances
Ts must also take into account all the circumstances including any other trust income available for the same purposes which must be applied proportionately
To whom should income be paid?
Not to a minor B as they cannot give good receipt
Paid either to the child’s parent or legal guardian or directly to the provider of the goods or services that are being acquired on behalf of the beneficiary eg the trustees could pay school fees directly to the school.
What kind of power is a power of maintenace?
Fiduciary power
The T must consciously consider the exercise of the power and if they choose to exercise it, they must act in good faith in the interest of the beneficiary.
Who must the income be used for?
Primary benefit of the minor B but it foes not matter that it may indirectly benefit the parent or guardian
What would constitute an improper exercise of the power?
unquestioningly paying the minor’s parents or guardian and assuming they will use it for the minor’s benefit
